The Death Of Paid WiFi

from the it's-over,-done-with,-kaput dept

It's been almost exactly six years since I got into a bit of a debate about whether or not there was a real business model for fee-based WiFi. Not surprisingly, I didn't think it would last, even as there were a bunch of startups (some well-funded) trying to stake out a claim that they could build huge networks of paid WiFi access points. Those businesses never got very far. While there are still some fee-based WiFi access points around (mainly in airports), more and more are becoming totally free. Starbucks (which had been a holdout) has gone conditionally free, and last week Barnes & Noble WiFi went totally free. So can we now close the book on the idea that fee-based WiFi was ever a good business model?

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Ask the same question next time you are in a major airport.

Yup. That's the one place it sorta still exists... but even that's been seen less and less. And, in fact, in the earlier debates I pointed out that was the one tiny market it might work, because you could limit competition. Though, even that is coming under pressure as well, as there's starting to be some competition coming from the airport, the airlines and other private vendors.

Oh yeah, and I'm seeing more and more airports with free WiFi. When I was in Toronto, it had fre WiFi in some places. The JetBlue terminal at JFK has free WiFi. I got free WiFi recently at the airport in Denver. Lots of others do still charge, but it's a pretty niche market. The debates years ago weren't about airports, though. They were about paid WiFi in shops and stores in your local downtown. And that's dead.

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For the most part, when I am seeing "free" wifi it is often "with purchase", a card given to you at the cash that gives you their WEP code of the day or whatever. I am not seeing very many wide open wireless systems. Wide open wireless systems are pretty a bad idea, no matter what Brad Pitt says ;)

I also have seen more and more "multiple system" wifi setups, where accounts on most of the major carriers for 3G also gives you wifi in the building.

I think what you are likely to see more and more of is "sponsored" wifi, where they say it's $10, but just come to the counter and it's free. Something along those lines, because people still value wifi, and the intention for the business is to get people in the door.

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I've yet to find a wifi hotspot that doesn't charge more than what my mobile carrier does. In most cases, I'm looking at twice as much and I need to give my credit card details to them instead of just buying a prepay voucher and topping up my phone...

Then you've got to worry about signal strength, the fact that anything but straight web browsing is generally blocked, etc.

What about data-limited free wifi - no more than so many megabytes per day/week/whatever from any given MAC address. Or free wifi, but you have to pay if you want to use a power socket...

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I went to the airport in NJ, and the WiFi was at cost. I ignored it, and was unhappy. In Japan, the WiFi was free. I was happy. In the Philippines, the WiFi was free, and I was happy.

WiFi is such a small thing, but opens the door to so much. On many occasions, I ate at the restaurant that offered free WiFi, even if the price may have been higher/selection was less. I will never choose a place that sells WiFi over one that does not offer it; offer it for free and you pretty much have my business locked up already.

Airports work under a different economic model

Airports have captive audience.
Are you suggesting the price of food in airports is competitive?

When you are the only vendor or severely limit selection to only those approved, then you can charge what you want. Airports, Movie Theaters, University Bookstores, Sports stadiums all feel they have a captive audience and can charge more.

Hotels that signed long-term contracts for Wireless access are now locked into charging guest $10/day and scaring away business.

I still think WiFi is valuable and worth paying for in some instances. But businesses like Bookstore(B&N), Coffee shop(SBUX) and restaurants (MCD) use WiFi to increase their business, increase their traffic, drive customers to their door and then make money doing what they do best.

Could still be a good business model

Being old enough to remember pay phones, I would say that there could be money made for WiFi that was priced similarly. You won't necessarily get rich, but you could get by if you did it right.

In my experience, however, WiFi was too costly and didn't fit the use cases that real people wanted. At a hotel and want to check email or surf the web for 30 minutes before bed? A hefty all-day fee won't cut it. Neither will a "more than a few cents per minute" plan either. Might as well go without, wait till you get home, look for a local library or pay the phone company their data fee for a month. Too many viable alternatives.

If, however, I were given the choice between unsecured free Wi-Fi vs a secured WPA connection for a small fee, I might consider the latter. Or I might just set up a VPN channel through a personal server. Depends on the price vs the hassle of doing it myself.

The other WiFi killer of course is the limited distance. Pay big dollars for a days worth of access and be tethered to the premises all day to get your money's worth. No thanks.

I think what killed WiFi was greed and overpricing, not the lack of a business model.

Re: Could still be a good business model

Umm.... 'Being old enough to remember pay phones...'? I wasn't aware that they didn't exist. I see them on a daily basis, all over the place. Streets, libraries, hospitals, hotels... There are still people who do not have/use cell phones.

Re: Could still be a good business model

So you agree that the standard $10 was too expensive, and at around $3, the service would have had more appeal.

One point you're missing in the Techdirt argument is that the "correct" price point is elusive. You see, there are two cases to consider, free and fee.

Free Wi-Fi can be offered at "best effort" levels of service. The cost to provide a free Wi-Fi service is about a DSL line, plus a one-time investment in a $50 router, that's about $50 a month. If you are a coffee shop, you can probably make that up by selling a few venti lattes and a muffin. When the Wi-Fi doesn't work, you say "Sorry", and cycle power.

The cost of fee-based services spikes up, just as soon as you make it a service with a price greater than zero. Customers have higher expectations than free users. You now need: 1-800 phone number for support, guarantee of service, brochures and printed instructions, billing infrastructure, welcome pages, login pages, help pages, credit card processor partners and their fees, alternate methods of payment, stored value tracking databases, timing databases, back end authentication, authorization, and accounting. You need business people to manage the business, facilities, receptionists. It goes on and on. If you spread all these expenses out over an expected number of users and set a price that allows some profit, you get...about $10.

Thus, public Wi-Fi is something we've always considered "too cheap to bill". The cost of just providing the service is dwarfed by the cost of providing it as a business. Thus, it is economically inefficient to provide it as a business. If you do, and you are in a competitive environment, someone else will do it the efficient way and out-compete you on price.

You see, it wasn't "greed and overpricing". Prices of the businesses were driven by real costs. It IS a case of no feasible business model in charging for things that are too cheap to bill.

Hey

Sensationalistic Headline is Sensationalistic.

I read a lot of stuff on here but starting a story with "OFMG ITS DEAD I TOLD YOU SUCKERS" and following it with "Its not really dead its just that some things have changed and/or we've made progress" is pretty poor taste in journalism.

Just saying. I might carry my laptop around now though if I dont have to keep buying Starbucks gift cards to get online.

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hahah i can't resist. please tell me thats a fucking joke. haha if its not, then you must take a lot of comfort in knowing the mind of your god. hahah.

No joke. I suppose "knowing the mind of your god" is part of what religion is all about. And in the belief of many, such as most Christians, Jews and Muslims for example, such blasphemy is a grave sin. Some consider it unforgivable.

It just would be a shame for someone to commit such a sin knowing no better. If they know better but choose to do so anyway, then that's up to them. At least they were warned and knew what they were doing.

Wifi Doa?

My only comment is that Panera has had free WiFi now for at least 4 yrs. I would certainly patronize a business that carries the service free of charge to ride their wave so to speak than to have to pay and pay again to drink burnt coffee. That coffee shop knows who they are! Enjoyed the article.

Embassy Suites totally screws their customers on this. You pay through the nose for a room, then they charge 10 bucks for 24 hours of Wi-Fi that's barely a hair faster than La Quinta's free WiFi. I know now that unless ES ever opens up their wifi I'll be looking elsewhere to stay.

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I love ES. I don't pay for it though. ES business model is business travelers that don't care what wifi costs, or how much the room is. Give me good free breakfast clean cushy room, and booze at night, and let my customers pay my wifi charge.

Hotels

Another paid wifi hold-out is fancy hotels. Most inexpensive and mid-priced places have free wifi, but there is a charge at a lot of expensive hotels. I have found that most of the fancy ones will waive the fee if you ask when making the reservation, especially if you make it sound like that is the deciding factor.

I was chatting with a manager at a $300/night hotel and asked him why they charged an extra $10 per day for wifi. He said that in the early days of WiFi they signed a 10-year contract with a provider. They were obligated to charge by the contract. The contract had recently expired at the time I talked to him, and he said they would drop it if they felt it was costing them business, but otherwise it is hard to give up a revenue stream.

Re: Hotels

Another thing to keep in mind for hotels is their primary clientele. Hotels which cater to corporate customers with expense accounts will be the last to drop paid wifi, since the majority of those customers don't see it as a burden.

Crazy as it sounds, I could see Disney being one of the first big resorts to do free wifi.

But Paris, France seems to be lagging

Spent 10 days in and around the Paris city center, and in all that time managed to only find a single free (with password, obtained from staff, and only if you knew to ask for it) Wi-Fi network. Everything else was pay-only and locked down.

And interestingly, the % of Parisians at coffee shops with their laptops was at least an order of magnitude lower vs. the US. Laptopping over coffee is just not part of the culture, which probably keeps demand for free Wi-Fi below the threshold of most business owners.

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Exactly what I was thinking - why get raped for wifi when you can just tether to your phone to get simple internet. Yeah, you aren't streaming video over a tethered connection, but you probably aren't going to be getting that kind of bandwidth in a shared coffee shop wifi connection either.

Airports that charge for wifi suck - but there's nothing you can do about it. You aren't going to make your flight decisions based on whether the airport has free wifi or not. :-(

Let's not be specious here

The model for fee versus free is largely unchanged since 2001, when networks of hotspots started to be built.

AT&T runs about 20,000 of them now, with all being for-fee except now the 700-odd that are B&N locations. There are notable free chains (Panera), and thousands of cafes that offer free service.

Nonetheless, the single biggest operator is a for-fee service. AT&T has made that sorta free by offering no-fee access to tens of millions of its landline and smartphone customers. But it's still oriented as an authenticated, paid network.

Business traveler venues are also still largely for-fee. Hotels, airports, convention centers. Hotels are starting to change, and some already tied free Internet access to affinity clubs that provide more loyalty.

The airport move, sorry to say, is pretty slow. Airports typically don't have the ability to forego millions in revenue and take on hundreds of thousands to millions in expense. Boingo Wireless has eaten the majority of North American airports, so we'll probably see defections in places where free Wi-Fi becomes an amenity to attract travelers, but why would an airport otherwise go free?

Hong Kong

Personally, I've found in Hong Kong that Paid Wifi Works. Hong Kong is dense enough that a whole Wifi network can be set up. PCCW (The people who do telephone booths) installed access points in every booth. I bring my Macbook anywhere, and use my Prepaid SIM card's money to pay for it. No problem there.

Have you ever been in Europe, Mike?

McDonald's WiFi

WiFi is totally free in UK McDonalds, I regularly sit in the car in the parking lot, eaing my homemade box salad, surfing and emailing.
It just requires a name and email address to use, and those don't have to be real!

The Death Of Paid WiFi

I agree that the concept of fee-based WiFi is silly and eventually will just die out. Free WiFi is just becoming too prevalent and therefore expected - especially at coffee shops. It's just a matter of time.

Overall I'd have to agree, that on the whole fee-based wi-fi is a joke and is fading out. And should fade out. Most places that offer wi-fi, aren't paying anything extra to actually offer it (outside of a transmitter or two when they first set it up. Their internet is already paid for, and their basic business model obviously makes them enough money to keep opening stores and the like. Now a (buy something and get the password) does make sense, so that someone doesn't just come in, take up space and do nothing to actually 'help' the location where they're using the wi-fi.

Airports

PDX airport also has free wifi.
Honestly, I would be willing to pay in an airport if they had reasonable fees. If I want to check my email on my laptop during a 1 hour layover, I am not going to pay $10 or $20 for it. I'll go through the trouble of trying to peck out an email on my phone instead. But $2 or $3 would be reasonable to me.

I just don't see why things are priced the way they are, although I don't have data to back it up.. It would seem that they would actually make much more money by charging less. However, the popularity of smart phones and 3G will eventually kill paid wifi in airports.. I think

Many American airports and a good number of hotels still charge us for WiFi. The cheaper the hotel, the more likely WiFi will be free; no parallel for airports. Nailing business travelers seems to be a business model for those two players.

My favorite response is tethering by Blackberry. I used to live off of my Sprint PCS card.

I think free wifi can totally be an acceptable part of a business model. Key word being PART, of course. But when I'm going out to lunch at work I'll definitely go to a place that I know has free wifi over similarly food elsewhere.

paid WiFi

Bandwidth

The access is free at DIA but the bandwidth is completely choked with all of the people using it. Last time through, I could not even get a few e-mail messages downloaded as the access was so slow. Same thing for free access at a coffee shop (believe it was Caribou) in Raleigh, ended up checking in early at the Residence Inn to get decent bandwidth. With all the new bandwidth intensive applications, access cost is not the problem it is download speeds.